New or Used: What Should I Do?

Many car purchases start with one decision: New or used? It's hard to remember a better time to buy either. There are plenty of good vehicles out there either way.

In the end, the decision to buy new or used boils down to what you can afford and what will give you peace of mind.

If you're on a tight budget, then buying a used car gets you the most vehicle for the money. You can count on one hand the number of new cars that list for less than $12,000. For less than half the price of the average new car, you can buy a 3- or 4-year-old used vehicle that is larger and loaded with more features than a small, bare-bones new one. But buying a used vehicle has its own risks, which could cost you over the life of the vehicle. The fact is, you are buying a vehicle that someone else has owned and driven. You don't know how it's been driven or how well it's been cared for. A used vehicle will almost certainly require maintenance and possibly expensive repairs sooner than a new one, and those repairs probably won't be covered by a warranty.

The Case for Buying New

For some people, buying used isn't an option; they want a brand-spanking-new car. They want to select the color and the features in it. There's definitely a pride of ownership and peace of mind in being a vehicle's first owner. Some other advantages include:

Reduced maintenance expense: A new vehicle won't need maintenance for the first several thousand miles, and then only an oil change and tuneup will be required. More manufacturers are covering the cost of those routine maintenance items. The new vehicle likely won't need new tires, a battery, exhaust system or brakes during its first few years of ownership, or even longer.

Warranty coverage: The manufacturer covers its new vehicles under warranty for at least three years, and some warranties last much longer. Under a manufacturer's warranty, if something goes wrong with the car, it's the responsibility of the dealer and manufacturer to fix it. Typically, these bumper-to-bumper warranties last from three years or 36,000 miles (whichever comes first — an important detail to note) to five years and 60,000 miles. In addition to comprehensive warranties, many automakers provide warranty coverage for powertrains. These often extend past the bumper-to-bumper warranties and are often valid for years longer. Some extend up to 10 years or 100,000 miles. It's good to be aware of these powertrain warranties; if you buy a used car, what's left of the warranty may (or may not) be fully transferable.

Peace of mind: If you encounter problems with your new car, you have legal recourse through state lemon laws. If you can prove that your new car is a lemon (definitions differ), you could receive a replacement vehicle or get your money back. Lemon laws apply only to new cars. You also can find out if your vehicle was returned to the used-car market as a lemon by looking at the vehicle's title or checking out a vehicle history report.

Roadside assistance: In addition to a comprehensive warranty, virtually all mainstream new cars and light trucks come with some level of free roadside assistance while the vehicle remains under warranty. In addition, some automakers reimburse you or provide alternate transportation if you are stranded far from home.

The Case for Buying Used

If you're not married to the idea of buying a new car, used vehicles have their own appeal:

Improved reliability: Although used vehicles typically don't carry the same warranties as new ones, the original factory warranty on a new car is often transferable to a second owner. Buyers of certified pre-owned cars from an authorized dealer can purchase a late-model used car and get the balance of the original warranty. Often, a manufacturer will offer a longer-term warranty for certified cars, or some buyers choose to add their own extended warranties. Of course, cars have been getting more reliable over the years, as consumers have demanded it.

Just like new: Another trend that makes buying used a better option is the proliferation of certified pre-owned programs. The idea started with luxury brands such as Lexus and Mercedes-Benz and has become a popular alternative for car buyers.